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My set of questions on the PNB mess
The PNB fraud has impacted four other banks namely Allahabad Bank, Axis Bank, Union Bank of India and the SBI. There are 6 beneficiary accounts, 3 of Nirav Modi and 3 of Mehul Choksi. The demand by these 4 banks on PNB for meeting the obligations under the LoUs is Rs 11,400 crore. The modus operandi has been extensively discussed in press and electronic media and does not require further elaboration.

But even prima facie, it is obvious that the standard operating policy and procedure was flouted with impunity and therefore there was more extensive collaboration and collusion at the branch level or may be at the controlling offices too.

The fraud raises the following fundamental questions:

1) How foreign exchange transactions under letter of undertaking (LoU)/bank guarantee were allowed outside Core Banking System (CBS)? Why was there no parallel reporting/recording system? How long this has been going on and why the controlling offices did not intervene?

2) How large value proposals were approved at the branch level that too at a junior level, without reference to controlling authorities? Was it as per delegation of power laid down for the purpose? If not, how it could be so easily flouted.

3) If the transactions went through nostro account of PNB, how come there was no reconciliation and the controlling offices of PNB were not aware.

4) Were none of these transactions reflected in the reporting systems of PNB and RBI?

5) How and who authorized the operation of the SWIFT by junior officials that too singly or between 2 of them? Why was there no monitoring or audit of the SWIFT?

6) How come all this happened without the notice of internal/statutory or concurrent audit?

Further, as Shri Jaswant Sinha wanted:

a) In how many cases was the transaction completed by the scamster paying the LoU amount to the Punjab National Bank? Similarly, how many LoUs were not honoured?

b) If the foreign bank branch did not receive the payment in time, did the branch bring it to the notice of the PNB? In how many cases was the guarantee of the PNB invoked to secure the due payment?

Once answers to the above questions are available, the puzzle will be solved and culpability established.

(The writer is an ex-banker, author and commentator.)

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